Nvidia warns of continued 28nm shortages

Nvidia president and chief executive Jen-Hsun Huang has warned that supplies of 28nm parts will continue to be constrained with a knock-on effect on lead times, likely until the end of the year.

Issues with shrinking the process size to 28nm have been well reported, with Taiwan Semiconductor (TSMC) in particular hitting some serious capacity problems at the 28nm node and coming in for flak from customers including Qualcomm. Now Nvidia's Huang warns that the problems are likely to continue into the fourth quarter of the year, meaning increased lead times for Nvidia's various customers.

Speaking during his company's second-quarter earning call late last week, Huang explained that the 28nm situation is unlikely to get better in the short term. 'We're expecting to be supply constrained throughout this quarter,' Huang admitted in response to an analyst's question, 'and then we’ll report on that in Q4.'

Huang blamed several factors for the shortages: 'But obviously it's a combination of allocation, yield and the market demand,' he explained, 'and so those are a lot of variables.' Although the company's fabrication partners are largely to blame for yield issues - the ratio of usable chips to broken chips - and allocation issues, market demand for Nvidia's products is also playing a part in the shortages.

'So far market demand [for our 28nm parts] seems very strong,' Huang claimed, 'and we're selling into a marketplace with quite a bit of pent-up demand for Kepler.' The news of increasing demand - which has led Nvidia to increased profits, thanks both to boosted per-shipment pricing and an increase in overall shipments - is good for shareholders, but does leave Nvidia struggling to cope with demand for its latest-generation graphics chips.

Relief is in sight, however. 'Yields are improving, and we'd like them to improve even faster because when you improve yield faster with our wafer-buy business model that we talked about some three quarters ago, your units grow and your margins grow,' Huang explained. 'So we really need TSMC, and they're working really, really hard to improve yield because it's good for everybody, and so we need them to really focus on that.'

TSMC, for its part, has been re-tooling its 28nm process in an attempt to boost yields - and, judging by Huang's comments, those changes are having a positive effect. With Huang warning of demand outstripping supply until at least mid-way through the fourth quarter, however, we wouldn't hold our breaths to see major price drops in any 28nm graphics chips until at least Christmas.